Tuesday, July 12, 2016

SPX (S&P 500) 2-Hour Chart Negative Divergence Developing

Here is an update for the 2-hour chart from a couple days ago. The SPX and INDU are at new all-time closing and intraday highs. The MACD continues higher so the bears are slapped around with higher highs in price. The red lines show the set up from the other day. So a couple candlesticks are needed to see if the MACD rolls over and it does not; that bugger still has an upward lift to it. The bulls are strong. The current candlestick will continue printing, however, and that MACD line can easily be flat after the opening bell tomorrow (Wednesday). The expectation would be for a market top anytime over the next four hours. If that MACD line slopes down after the opening bell, the top may be in at the get-go.

As always, the only thing that can change the forecast is the central bankers or other positive news, such as bank earnings, that is not yet priced into the chart. This morning, former Fed Chairman Bernanke shows up in Japan, high-fiving PM Abe and BOJ Governor Kuroda espousing the greatness of Keynesian economics. The Three Stooges were drinking sake like madmen and planning a helicopter ride to drop money from the sky. The BOJ plans to provide huge stimulus so stocks catapult higher; the NIKK is up +7% in two days. Thus, stocks should top out now as long as a central bank does not intervene.

The upper standard deviation band is violated so the middle band at 2121 and rising is on the table. The neon lines show a two-leg bull flag pattern in play, first leg from 2000 to 2105, which is 105 points, then sideways consolidation with a drift lower forming the flag, then price begins the second leg from 2075-ish so the target is 2180. This is what the bulls are cheering for. The indicators, however, should roll over and forecast a drop in price. Sometimes estimating the bull flag targets is more art than science; the second leg has already ran a long way.

The red lines show neggie d but that pesky MACD line is a single hair higher over the last four hours. The expectation is for a market top on Wednesday and that would fulfill the negative divergence on the 2-hour chart above and the complacent put/calls and the elevated NYMO. Keystone placed trades on the short side this afternoon. Positive bank news or other market jawboning will likely extend the top a few more hours. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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